Federal Tax Day - Current, I.3, Dyed Fuel Refunds Processed After Guidance (Ann. 2026-1; IR 2025-125), (Dec 23, 2025)

P.L. 119-21, commonly known as the One, Big, Beautiful Bill Act (OBBBA), added Code Sec. 6435 to allow recovery of the amount of Code Sec. 4081 tax previously paid on diesel fuel and kerosene that later qualifies as eligible indelibly dyed diesel fuel or kerosene (dyed fuel) exempt from Code Sec. 4081 tax under Code Sec. 4082(a). Code Sec. 6435 allows a person to claim a payment (without interest) equal to the amount of Code Sec. 4081 tax paid with respect to dyed fuel if the person establishes to the satisfaction of the Secretary of the Treasury or the Secretary’s delegate that: (i) the person removed the dyed fuel from a terminal; (ii) tax was previously paid under Code Sec. 4081 (and not credited or refunded) with respect to the dyed fuel; and (iii) the dyed fuel is exempt from Code Sec. 4081 tax under Code Sec. 4082(a). Code Sec. 6435 is effective for dyed fuel removed on or after December 31, 2025. While Code Sec. 6435 is functionally similar to other rules providing for excise tax payments, it differs in that it lacks a directive to treat the payments as if they constitute refunds of overpayments of the underlying tax. Further, the OBBBA does not provide a specific appropriation for Code Sec. 6435 payments. The only existing appropriation for paying Code Sec. 6435 claims is the general refund appropriation, which is available only to the extent the claimant is the same person that paid the Code Sec. 4081 tax to which the claim relates. Thus, absent a statutory change, the Department of the Treasury and the IRS lack the authority to pay Code Sec. 6435 claims to anyone other than the person that paid Code Sec. 4081 tax on the dyed fuel to which the claim relates. The Treasury Department and the IRS intend to issue guidance related to Code Sec. 6435 and the process for requesting a refund. It is anticipated that the guidance will be issued in early 2026 and request that taxpayers hold any Code Sec. 6435 claims until this guidance is issued. The IRS will not process any Code Sec. 6435 claims until such guidance is issued.

Announcement 2026-1

IR 2025-125